Eskom’s shocking R600bn debt plan

That amount could build 20 Gautrain systems.

Things could get worse before they get better, say power utility’s CEO and the board.

Eskom plans to increase its debt from the current R398 billion to an unprecedented R600 billion in the next four years. This is in line with the 2017 corporate plan, Eskom’s operational roadmap as approved by the shareholder – department of public enterprises, said the group’s chief executive Phakamani Hadebe.

The amount would equal about half the tax collected by the SA Revenue Service in the 2017-18 season, according to provisional numbers from the receiver. It could also build 20 Gautrain systems, and is more than the R528 billion South Africa had budgeted for social grants over the next three years.

Hadebe, who only joined Eskom in January, put on a brave face when he announced that the utility had showed a R2.3 billion net loss and received a qualified audit opinion for the year ended March 31, 2018.

Net cash from operations dropped from R45.8 billion in the previous financial year to R37.6 billion and irregular expenditure skyrocketed from R3 billion to almost R20 billion. The basis for the qualified opinion is the uncertainty that the R20 billion reflects the total extent of irregular expenditure.

Hadebe and his executive team also made it clear that things could get worse before they get better.

Eskom has never before disclosed that its debt could escalate to R600 billion. Two years ago, then chief financial officer Anoj Singh told City Press that the debt “was likely to peak at ‘R500 billion-odd’ after three years”. It seems that the new board costed the existing multi-year corporate plan and came to a total of R600 billion. This clearly baffled Hadebe. At the results presentation last week, he expressed surprise that Eskom’s runaway debt was not a priority under the previous management. At the current R398 billion debt level, the parastatal is borrowing to service its debt. Nevertheless, the attitude was that “things will sort themselves out”, said Hadebe.

What is encouraging is that Hadebe realises that this debt trajectory is unsustainable and has to change.

Net cash from operations dropped to R37.6bn